LAGS High Court Upholds the Right of a Taxpayer to Challenge Any Tax Assessment at the High Court Even When He Fails to Object to the Assessment Or File An Appeal at the TAT
On 20th June, 2018, the Lagos State High Court delivered a ruling in Chemiron Nigeria Ltd v. Lagos State Board of Internal Revenue on the jurisdiction of the State High Court in personal income tax matters. The Claimant commenced the action at the Lagos State High Court to challenge the Demand Notice served on it by LIRS for alleged failure to deduct and remit taxes due from its employees.
In response, LIRS filed a preliminary objection challenging the jurisdiction of the High Court to hear the matter on the ground that having failed to formally object to the tax assessment and take other steps set out in Sections 58 and 60 of the Personal Income Tax Act as well as Section 59 of the FIRS Act 2007, the Claimant's action is incompetent.
The court held that an action commenced at the High Court by a tax payer against an assessment is competent even when the taxpayer fails to forward a notice of objection to the tax authority or explore the tax man's in-house mechanism before commencing the action at the High Court.
Position Of The Parties
In urging the court to strike out the action, LIRS' counsel argued as follows:
- Under applicable laws, the taxpayer has 30 days to object to the Demand Notice served on it by LIRS. The Claimant commenced this action at the High Court instead of objecting to the Demand Notice in line with the provisions of the Personal Income Tax Act.
- The Claimant failed to follow the procedure for resolution of tax disputes set out under Sections 58 and 60 of the Personal Income Tax Act and Section 59 of the Federal Inland Revenue Service (Establishment) Act, 2007.
- The High Court lacks the jurisdiction to entertain the action and that an appeal ought to have been commenced at the Tax Appeal Tribunal.
In response, the Claimant urged the court to dismiss the preliminary objection on the following grounds:
- By virtue of Section 272 of the Constitution of the Federal Republic of Nigeria, 1999 (CFRN), the High Court, has the jurisdiction to hear the Claimant's action and that the jurisdiction of the High Court is not limited or affected by the provisions of the provisions of the Personal Income Tax Act and the Federal Inland Revenue Service (Establishment) Act, 2007.
- That the Claimant is not under obligation to take its grouse to the Tax Appeal Tribunal and that Sections 58 and 60 of the Personal Income Tax Act are inapplicable to the Claimant.
Decision Of The Court
- The jurisdiction of the High Court as set out under Section 272 (1) (2) of CFRN is unlimited subject to the provision of Section 251 of CFRN.
- Nothing in Section 251 of CFRN precludes the State High Court from exercising jurisdiction in tax disputes not related to Federal taxation.
- A tax payer like every other citizens has the right to approach the High Court to seek redress. The taxpayer's decision not to explore the tax man's in house mechanism (set out under the Personal Income Tax Act) before commencing the action, does not affect the jurisdiction of the High Court over such an action neither does it render such action incompetent.
Implication of the Ruling
This decision of the court clearly shows that the taxpayer also has the option of approaching the High Court for redress without taking steps to follow the procedure set out under Section 58 and 60 of the Personal Income Tax Act. This is a deviation from the established practice of taxpayers commencing their cases at the Tax Appeal Tribunal further to Section 13 of the Fifth Schedule to the Federal Inland Revenue Service (Establishment) Act, 2007 which provides that a taxpayer who is aggrieved with any decision or action of the tax authority may challenge such decision or action at the Tax Appeal Tribunal within 30 days of such decisions or actions.
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